Homework 1
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PanoptoLectureSlides-IPE.pptxTECON 325 International Political Economy:
Reference: IPE, 5th ed., Oatley
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Introduction to IPE
Outline
Concepts, examples/episodes, two basic questions, and the areas of studying IPE
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Introduction/Concept
Two key aspects of International Political Economy (IPE)
1. Political Economy: how governments affect domestic economic system and vice-versa, e.g. their interactions
The role of states in economic affairs is important
Industrial nations: regulate banks and bail out, cutting taxes, environment regulations, maintaining incomes for the poor, etc.
Developing Countries: adopt various strategies
But government actions and economic outcomes are the results not only of what happens inside a nation
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Introduction/Concept (cont.)
Second aspect of IPE
2. International dimension
Gov’ts strive to maintain controls over their economies, while try to reap the benefits of international trade, foreign investment, and finance
But increasing global interdependence makes this effort much more difficult and uncertain
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What is IPE?
IPE examines the intersection of politics and economics at the international level
Politics deals with power, while economics deals with the scarcity of resources/allocation
IPE requires an understanding of both politics and economics
Purpose of IPE - Develop a modern theoretical framework to understand the global issues
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What is IPE?
IPE is the study of political battle between the winners and losers in global economic exchange
Economic integration makes “society” better-off
Lowering barriers to the flow of goods, money, and factors of production
Total Benefits > Total Costs
Gains are distributed unevenly
Integration creates “winners” and “losers”
“Losers” fight against integration, “winners” fight for it
Played out through domestic and international financial /political institutions
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IPE Dynamics
Workings of IPE
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Politics
Global Economy
Economic Forces
Policy
Recent Events
The global financial crisis of 2007-2008
Started with the decline of housing markets in the US, households defaulted on their mortgage loans
Failures of many big banks and financial institutions
Later transmitted to Euro zone and across the globe
Then became a global recession, loss of jobs
Recent trade war between the US and China
Unexpected election victory of US president Donald Trump, and his nationalistic trade policy
Imposed high tariffs on Chinese imports, China retaliated
IMF predicted global recession and slow growth
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The Case of Steel Tariffs (2002-03)
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Illustrate the type of conflict we will study
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The Case of Steel Tariffs (2002-03)
U.S. steel increasingly uncompetitive in global markets
Large share of American markets captured by imported steel
34 mills closed 1997-2002
18,000 workers laid off
Steel firm owners were losing, workers fear job losses
Bush administration lobbied by United Steel Workers of America
Raised import tariffs to protect domestic steel industry
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The Case of Steel Tariffs (2002-03)
Tariffs raised domestic prices, hurting domestic users
Automakers, U.S. consumers of steel
Foreign steel producers (EU and Japan), they threatened to retaliate, brought case before the WTO
Losers lobbied their gov’ts, US Congress, and Bush administration to lower tariffs
Bush administration drops tariffs
Bush Steel Tariffs demonstrate political battle between winners and losers in IPE study
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The Case of Steel Tariffs (2002-03)
What we need to understand in IPE:
Economic interests of political groups
Economic theory
Domestic and foreign political systems
The role of international organizations (WTO)
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Two Basic Questions
IPE is more than just describing the interactions between politics and economics
How does politics affect resource allocation?
Resources are finite, scarce
People disagree over how to use them
What are the consequences of these decisions?
Welfare consequences: efficiency? social “well-being”?
Distributional consequences: who gains/loses?
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The Case of Steel Tariffs (2002-03)
Allocation: U.S. steel production is more profitable
More investment in U.S. domestic steel industry
Allocated more capital and labor to steel sector, now not available to other US industrial sectors
More jobs for U.S. steel workers
Consequences:
US steel was uncompetitive, tariffs made new allocation inefficient: “society” is worse-off
Tariffs also created winners and losers
U.S. steel wins, while U.S. consumers, steel users and foreign producers lose
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IPE Areas of Study
Study the global economy by dividing global economic activity into four distinct aspects
Four areas of study:
International Trade System (real)
International Monetary System (monetary)
Multinational Corporations (MNCs)
Economic development
All are distinct but interrelated
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The International Trade System
Centered around the World Trade Organization (WTO) – IGO dedicated to global economic integration
Reduce tariffs and trade barriers
164 members, ~$35 trillion in goods/services annually
Non-discrimination – MFN and National Treatment
WTO “challenged” by the growth of regional trade agreements (e.g. NAFTA, EU)
IPE scholars study how the struggle between winners and losers shape global and regional trade systems
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The International Monetary System
Decentralized – allows people using different currencies to trade with one another
Ensure the availability and exchange of currencies of the participating countries
Disruption will have severe effects on international trade and investment
How does the struggle between winners and losers shape monetary and exchange rate policy?
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Multinational Corporations
Controversial but prominent role in global economy
1/4 of global production, 1/3 of global trade
Extend managerial controls across national borders and make important decisions about production
Have strong impact on resource allocation
Powerful political influence in many different countries
How does the struggle between winners and losers affect efforts to attract and control MNCs?
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Economic Development
Different development strategies associated with different outcomes
IPE scholars investigate policies that increase growth and living standards
Try to figure out which strategies have been successful and why
How does the struggle between winners and losers shape the development strategies governments adopt?
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Next Topic
Three traditional schools of thought - Mercantilism, Liberalism, and Marxism
Thank you!
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